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Yahoo`s Latest Reorganization

When Jerry Yang and Susan Decker took over the chief executive officer and president positions at Yahoo, ousting Terry Semel, everyone knew that it was just the beginning. Big changes for management and organization lay in the very near future for the venerable search engine. In this article, we’ll take a look at those changes, and consider Yahoo’s future.

Yahoo co-founder Jerry Yang promised that no sacred cows would be spared when he assumed the CEO position in June and began a top-to-bottom examination of the company that he projected would last 100 days. Near the halfway point, Susan Decker released a memo detailing the new structure. It serves at least two purposes at once: it increases accountability while simultaneously streamlining the company by combining several different products and services that belong together.

The biggest change involved the creation of a new division called Global Partner Solutions (GPS). Yang and Decker gave this division responsibility for all of Yahoo’s partners, or as the memo put it: “advertisers, agencies, resellers, publishers, ad networks, developers, or others…This new group will be charged with creating, delivering and coordinating global best practices for solutions to all of our partners.” More importantly, however, the group will handle all of Yahoo’s sales, marketing, and business development for the company’s U.S. go-to-market efforts, with the exceptions of business development deals for Mobile and content.

Yahoo units that now come under the new GPS umbrella include Global Sales, the Online Channel, the Yahoo! Publisher Network, Corporate Partnerships and Hot Jobs. Susan Decker placed Hilary Schneider at the head of the new division. With Schneider in, six-and-a-half year Yahoo veteran Greg Coleman will be leaving the search engine in February. He took the company from $600 million a year in advertising revenues to more than $6 billion today, thanks to his work with the company’s search and display ads sales teams.

A change that big must impact other portions of Yahoo. For Schneider to assume her new duties, her old ones had to be moved. So Yahoo’s properties in the Local Markets and Commerce Division, except for HotJobs, shifted into the Yahoo! Network Division under Jeff Weiner. For Weiner, this must be almost like coming home, since he oversaw a number of these properties previously, when he served as senior vice president of Search and Marketplaces. Decker expects, as a result, that this part of the transition will be seamless.

{mospagebreak title=Yahoo’s Brain Drain}

So will the GPS help Yahoo find its way at last? One can only hope so, since so many Yahoo executives have been finding their way to other companies. Coleman is just latest in a long string of talented individuals who have left the search engine, voluntarily or otherwise. At least ten others have moved to other companies in the last year, many to start up companies.

Dan Finnegan, responsible for HotJobs, left in May, not long before chief technology officer Farzad Nazem, who has yet to be replaced. Chief Sales Officer Wenda Millard quit the following month, and become president of Martha Steward Living Omnimedia. July saw the loss of Jerry Shereshewsky, who reported to Millard; he became CEO of Grandparents.com, a social networking site. A number of former Yahoos who had held very important positions with the search engine also became CEOs or took on major responsibilities at other firms, including Steve Mitgang, Gaude Lydia Paez, Bill Demas, and Paul Levine.

It doesn’t help that Yahoo’s former media group head Lloyd Braun has started poaching at his old company to help his new one, production firm BermanBraun. Horse changers include Geraldine Martin-Coppola and Mike Weetman. Jennifer Trespacz, Braun’s former chief of staff at Yahoo has also left recently, though she won’t be joining Braun; she took a job with games developer Electronic Arts.

To be sure, this isn’t entirely Yahoo’s fault. It’s only to be expected when upper level management attempts to get its company back on track. Kara Swisher, blogger for BoomTown, noted recently that “Many sources at competing Web outfits, such as Google and Facebook, tell me that they have been inundated with Yahoo resumes of late.”

Still, those who worry about such things must be concerned about the caliber of the people remaining at Yahoo. Tim Welo, senior recruiter at Victoria James Executive Search, a recruitment firm that focuses on the Internet industry, put his finger on the general problem without specifying Yahoo’s plight. “When something’s going on, the smart people look early, the less smart people wait a little longer, and some people put their heads in the sand,” he explained. This is why Yahoo must move quickly with its latest reorganization (it seems to have been in continuous turmoil since December at least) wait too long, and there will be too many ostriches and not enough brains.

{mospagebreak title=A Closer Look at Yahoo’s Crew}

So who is left at Yahoo? Swisher has received a number of comments from “Yahoos, ex-Yahoos and others” about the company’s latest changes. While she does not identify any of the people making the comments, one of them is particularly revealing. “Now we’ve got a CEO who has never been a CEO before [Jerry Yang]. A COO with limited operations experience [Sue Decker]. A CFO who has never been a CFO in his life [Blake Jorgensen] and an EVP of Ad Sales with no sales experience [Hilary Schneider]. Next, I think we’ll hire a CTO who is well versed in arts and culture with no prior tech experience [still a mystery].”

Yes, this sounds dangerous, but it’s also something of an exaggeration. Let’s look at Schneider first. She was smart enough to get out of the newspaper business at Knight Ridder. She has plenty of experience being in charge, having formerly served as president and CEO of two companies (not simultaneously), Red Herring Communications and Times Mirror Interactive. At the very least, then, she knows how to work with troubled digital properties. The new structure at Yahoo gives her as many direct reports as Decker (8). She herself may have no sales experience, but a good CEO learns to rely on experienced staff.

Blake Jorgensen may have never been a CFO at a big company, but he knows money. He is a former investment banker and manager at Thomas Weisel Partners and Montgomery Securities. His new position should put everything he has learned to the test, and then some. He is a good friend of Decker, which should be a big help to him not because the new Yahoo president is likely to
protect him, but because she was highly commended for her work as Yahoo’s CFO. If necessary, Jorgensen should be able to turn to Decker for advice but as president, Decker will probably be too busy turning Yahoo around to be tempted to micromanage him.

Of course, this brings us to Decker herself. It’s true that she has limited operations experience. It’s worth noting, however, that when Yahoo’s stockholders called for a serious management restructuring in a grassroots movement not that long ago, Decker was one of the few individuals (along with Jerry Yang) who did not come in for serious censure. Quite the opposite in fact. Judging from the press she’s received, she does not seem to have the charisma of a Steve Jobs, or the intensity of a Steve Ballmer. But she does have focus, strength, the loyalty of her troops, and the kind of company knowledge you can only get from serving as CFO. Her plain-spoken, no-nonsense style of leadership is probably a breath of fresh air for the beleaguered firm. And investing $1.1 million of her own money in shares of Yahoo actual shares, purchased on the open market rather than options is a vote of confidence likely to play well with analysts, stockholders, and other Yahoos.

Speaking of Yahoos brings us to the biggest Yahoo of all: Jerry Yang, who founded the company with David Filo. He is also no Steve Jobs, but he is the right person to help find a vision for the venerable search engine. Yes, he was around in the company’s early days of milk and honey, but this is not the first time he’s seen a downturn: remember, Yahoo made it through the first dot-com crash alive. Don’t count him or Yahoo out just yet.

{mospagebreak title=Yahoo’s Options and Bright Spots}

There are certain bright spots to Yahoo’s situation. Jeff Weiner was considered by many to be loyal to Terry Semel, and not expected to stay around for very long after Semel left. But against all odds, he’s still with the company; the return of units that were taken from him as part of an earlier reorganization might be a vote of confidence. It might even convince him to stick around a little longer, which can only be helpful with so much top talent looking to leave the company.

Yet the company is also receiving some good talent. A Yahoo spokesperson says that “Yahoo continues to attract top talent across all areas of the company, and nearly 90 percent of the job offers we extend are accepted.”

Panama, Yahoo’s new advertising platform, is finally beginning to have an impact. Launched February 5, many advertisers saw the click-through rates for their ads go up. This raised the company’s stock price temporarily, until word came out that quarterly profits were down 11 percent; somewhat appropriately, company shares dropped 11 percent on the news. Wall Street is not patient; as noted recently by Douglas A. McIntyre, writing for 24/7 Wall Street: “The company’s new Panama project, which was built to take market share from Google’s text ad business, has not shown that it can push back the tide of a stagnant topline.” One wants to be optimistic about Yahoo, but many are left wondering how many quarters they must wait.

Still, the most recent reorganization is seen by many as a positive sign. Brian Bolan, an analyst at Jackson Securities, notes that “This is a statement saying ‘We’re going to continue to make these changes as needed as opposed to waiting.’ It’s a positive sign that they’re following through with what they said they will do.”

But will it be enough? At one point, there were rumors that Yahoo had considered improving its monetization of search ads by farming out some of the operation to arch rival Google. And in a recent interview, Microsoft CEO Steve Ballmer was asked if he was in talks to acquire Yahoo. He said “If I were, I wouldn’t say anything, and if I weren’t, I wouldn’t say anything.” That kind of talk, combined with Yahoo’s recently depressed stock price it is at a three-year low could make the venerable search engine a very ripe takeover target. One assumes this is the furthest thing from Yang’s mind, but it is almost possible to see the vultures circling. We’ll see if Yang, Decker, and the rest of the team can keep them away a while longer.